Data Group Ends Peeks After Leaks

By

Brody Mullins and

Michael Rothfeld

June 20, 2013 7:32 p.m. ET

WASHINGTON—A private-sector group that produces a leading consumer-confidence survey is suspending its practice of giving media organizations an early preview because it fears the information may be leaking to traders before the public.

The Conference Board, which produces the survey, said Thursday it instead will publish some of its economic indicators, including the monthly consumer-confidence survey, simultaneously on its website and through a news release.

The move is one of the biggest cracks thus far in the traditional way in which private organizations and governmental agencies release market-moving economic data to the public. Previously, the organization had given a 30-minute peek to a small group of journalists who used the head-start to digest the often complicated results and prepare reports.

The advent of high-speed computerized trading has pushed investors to seek market-moving information a fraction of a second before their competitors. To meet this demand, many media organizations, including Wall Street Journal publisher Dow Jones & Co., have set up systems to feed data directly into traders' computers, allowing elite investors to trade on the information ahead of the broader public.

That development, combined with recent instances of suspicious trading ahead of media embargoes, has prompted a broad re-evaluation of how this data is disseminated.

The Wall Street Journal reported earlier this year that the Federal Bureau of Investigation and Securities and Exchange Commission are examining suspicious trading in the moments before the release of economic indicators from several U.S. government agencies, including the Commerce Department and Treasury Department.

In a page-one article last week, the Journal reported that traders can buy advanced looks at some market-moving economic indicators produced by private-sector entities. Often, the users of these services are high-speed trading firms.

A consumer-confidence survey produced by the University of Michigan is released two seconds early to traders willing to pay Thomson Reuters Corp.TRI-0.91% $5,000 a month plus a $1,025 connection charge. Thomson Reuters pays the University of Michigan for the right to exclusively distribute the indicator. Thomson Reuters in a statement last week said it is "open and transparent about how data is released but always looks for ways to improve this transparency further."

Jon Spector, the Conference Board's president and chief executive, said the move came after the group explored ways to make money from its survey and concluded there was no way to do so fairly.

"We basically became concerned that while it might be perfectly legal to monetize the data in certain ways, that it could contribute to the perception that the playing field wasn't level," Mr. Spector said.

"Particularly now, maybe more than ever before, we think that the public trust in the financial markets is something we should be building on, not undercutting," he said.

Mr. Spector said the decision was made three weeks ago. The recent Journal report "confirmed our decision," he said.

The group currently sells historical data to subscribers, but releases new data free of charge.

The Conference Board's data has been released early a number of times in recent years. Two years ago, News Corp.'s Dow Jones accidentally released Conference Board data 10 minutes early by pressing the wrong button on a publishing system, Dow Jones confirmed.

Earlier this week, Dow Jones told the Conference Board it had inadvertently released the Consumer Confidence Index early on several occasions in the past several months. Dow Jones's computerized clock had been out of sync with the Atomic Clock, the official clock used by the publisher, a Dow Jones editor told the group.

In a written statement, Dow Jones said a variety of data had been released early to customers of a news feed primarily for high-speed trading.

"A malfunction in a timing device and its fail-safe system caused some economic-indicator data to be prematurely released by a fraction of a second to some Dow Jones [news feed] customers," the statement said, adding that the company has "taken corrective measures."

A bug in vendor software that auto-corrects the time led to the early release of data between May 2 and June 17, according to a person familiar with the matter. Dow Jones's explanation came after the Conference Board made its decision to change how it distributes the data.

Mr. Spector said the group would begin discussion with media companies about ways to resume the embargo, but that some options, such as the lockup rooms used by government organizations, don't make sense for the nonprofit group.

"These issues come up from time to time," said Gail Fosler, a former president of the Conference Board who worked there for two decades. "Every few years somebody just can't restrain themselves and jumps the gun and reports it early."

In Washington, various federal agencies have their own methods of releasing market-sensitive data to the public. Last year, the Labor Department tightened its rules for how it releases its embargoed economic reports, such as the monthly unemployment figures.

Worried that government data was leaking early, the Labor Department rebuilt its press room to block electronic communications, and required reporters enter the room through a metal detector.

The department also barred reporters from publications that it deemed weren't "primarily journalistic enterprises."

Other agencies haven't made major changes in the way they release economic data.

The Conference Board is one of dozens of private entities that produce and disseminate their own economic indicators. Its consumer-confidence survey is closely monitored by investors in part because its survey is based on 5,000 respondents.

The mood of consumers is considered crucial to future economic growth because content consumers are more likely to spend money. The Consumer Confidence Index has been produced since 1967.

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